US Truck On Fire, Speeding Down To Death Valley

February 13, 2008

Elaine Meinel Supkis

We should pool our savings and go to the major muni auctions! The latest one was for bonds at an amazing 20%! WOW. I remember when we bought Port Authority bonds at 14% and thought this was a fabulous deal. This actually means a collapse of the entire funding system that runs our society. If this keeps up, we will see a yawning chasm between the actual cost of borrowing and the fake Fed rates! Also, depressed Japan's economy grew by 3.7%. HAHAHA. Now, will all the US economists who mocked me about my contention that Japan has no depression, apologize? Naw. Maybe if I were to blow up some buildings.....by the way, more central banks have suddenly decided to NOT copy Japan and the US and are copying China. No shock in this end of the internet, eh?

Auction-Bond Failures Roil Munis, Pushing Rates Up

Bonds sold by U.S. municipal borrowers with rates set through periodic auctions failed to attract enough buyers as banks including Goldman Sachs Group Inc. and Citigroup Inc. that run the bidding won't commit their own capital to the debt.

Rates on $100 million of bonds sold by the Port Authority of New York and New Jersey, with bidding run by Goldman, soared to 20 percent yesterday from 4.3 percent a week ago, according to data compiled by Bloomberg. Presbyterian Healthcare in Albuquerque and New York state's Metropolitan Transportation Authority also experienced failures, officials said.

What began three weeks ago with too few bidders for auction-rate debt backed by relatively small entities, such as Georgetown University and Nevada Power, has widened in recent days to include large issues of state governments, such as New York state's Dormitory Authority. The auction failures provide new indication of Wall Street's unwillingness to commit capital amid $133 billion in credit losses and asset writedowns.

``It's the beginning of the end for the auction-rate market,'' said Matt Fabian, a senior analyst with Concord, Massachusetts-based Municipal Market Advisors. ``Banks have stopped supporting the market.'

The banks and Wall Street and all the damn pirates have no more money!!! The money they were using to buy up the planet was all fake money, it was all loans, it was carried away from Japan and they thought they could do this forever! And to everyone's shock, the bidding for interest rates on these bonds shot through the fucking, goddamn ROOF. I am openmouthed. I watched this in NY in the past! My family has bought these bonds in the past! We got a very good return, too! After some very happy years getting annual checks, the Port Authority redeemed them all when interest rates were near 1%. We were kind of ticked off but I figured, they would go up again when the inflation chickens come home to roost. But unlike the previous collapse where Volker had to raise rates to these levels, this time around, Bernanke is dropping rates!

I have NEVER seen this before. The failure of this auction is a warning light. Let me tell you about warning lights. Tonight, I had to drive my biggest snow plow out into the mountains here because we had half a foot of snow then rain then ice then snow and it was a huge, nasty mess that weighed a ton. So I was tooling along with the radio blasting and the diesel chugging along in dangerous, dark, icy mountain roads with virtually no houses when the hoses broke and sprayed radiator fluid all over the place. This neat red flashing light came on telling me the engine was now overheating. Instead of ignoring, it I managed to reach a farm and pull off the mountain road which had no shoulders.

'Looks here like your truck is broke, ' noted the old farmer when he came out with the dog and flashlight.

'Yup,' I said. 'Seems like it.' We speak this funny language out here. You see, this is old farm country.

Many years ago, I was deep in the mountains when my truck broke down when I was hauling horse manure. The guy who owned the extensive fields and cows around where I was broken down was very generous in helping me make repairs. At the end, he said, 'Are you married?' and I said, 'Yup.' He was heartbroken because, 'Its hard to find wimmen who shovel shit.'

And I shovel lots of that online when I go through the news. We are in deep shit and have no shovel and the red light is flashing on our truck that is supposed to plow the roads and remove the shoveled shit. And I am NOT going to marry Bernanke. He probably won't like the smell of horse manure in bed, anyway.

But someone has to be able to do all these things. Note how not just US but global stocks shot up on the supposition that Buffett just might be able to fix our economic truck which caught on fire on the highway of life and is full of shit and both are now on fire. We need a fire truck.

This reminds me of when I was a teenager. I was driving in Death Valley. My very old WWII Dodge truck I got at an auction threw a piston and I was 30 miles from any humans. So a friend and I took off the hood and got in and pointed downhill towards the Colorado River basin and Needles. I drove very fast until I had enough speed to coast to Needles. When I came to the town, the truck caught on fire. So I came barreling into town smoke and flames all over the place and the fire department came roaring out to tackle me before I could crash. I jumped out.

That, that is what we are! The US wants to go downhill. The piston is in the pan. The engine is now on fire. We are driving towards Europe and screaming, 'I can't find the brakes anymore!'

Overview: Failed muni bond auctions deepen crises

While Wall Street cheered an unexpected rise in headline US retail sales on Wednesday, failed auctions in the municipal bond market represented a further escalation of the credit squeeze that has afflicted banks since August.

The latest twist in the credit squeeze sparked a steeper Treasury yield curve as investors bought the two-year note at the expense of long dated bonds.

“What started in housing, moved to subprime mortgages, expanded to credit, is now spilling into new arenas,” said David Ader, bond strategist at RBS Greenwich Capital. “As the economy slows credit is becoming more and more dear.”

Credit is dear? This is funny talk for, 'Due to REAL inflation, bonds for more than three days is going to HURT.' The desire of the rulers to pay off public and private debts at 1% is hitting a wall called 'reality'. When I threw that piston, I said, 'We got to coast to town' not because I was stupid. We were in aptly named 'Death Valley' where there was NO TRAFFIC. I didn't want to try walking 30 miles. That could be fatal.

In this case, the US has to do something sane and the first step is to admit something is wrong! After all, up until last month, the mantra was, 'America is a strong economy and everything is going just great!' I disagreed but then, I have lots of experience with old trucks breaking down in horrible places.

Paulson Sees New Rules on Packaging Loans Into Bonds

Treasury Secretary Henry Paulson said U.S. financial regulators will propose changes in the rules for packaging loans into bonds in the aftermath of the subprime credit collapse.

Paulson said it will be ``a number of months'' before the Presidential Working Group on Financial Markets announces its recommendations and that easing credit strains is the first ``priority.''

Banks and securities firms have amassed more than $146 billion of losses after a surge in subprime mortgage defaults rippled through markets. Consumer advocates said the so-called securitization process magnified the damage because some lenders had less incentive to ensure borrowers could repay their debts.

Banks can't let people live forever in houses for free. Squatter's rights kick in after a while. So the banks have to evict. And they shall. They don't want to be up the creek none but they don't want to be stuck with a paddle and no canoe. If they accept lower interest rates for past mortgages that had higher rates, they lose a lot of money. And investors who now see muni bonds going for 20% [!!!!] will be rushing to the next muni sale. I know, I would. Hell's bells, talk about a high return! No bank will be able to make any mortgage if people decide to not pay at all. This is a real crisis. The government will bow to pressure and try to keep everyone put so the illusion of normalcy keeps up.

I once lost everything, practically, except I stubbornly clung to my mountain here. I paid all my taxes faithfully and we lived in a tent...for TEN YEARS. I managed to build a house. We now live there. I do NOT believe in a free ride. People can and do live in tents and other temporary housing sometimes for a long time. We had NO running water unless you move at a smart pace while carrying buckets or it was raining cats and dogs and the cat just poked a hole in the tent roof, chasing a squirrel. The refrigerator turned on around October and shut off in March. Heat was a Victorian wood stove. If anyone fears living in a tent rather than a California condo or a Palm Beach resort can write to me and I will happily explain how to use kerosene lamps and tie down a tent roof when winds blow more than 80 miles per hour.

Americans have to realize, there is no free lunch. Or rather, our free lunch is ending. We have to bite the bullet. Fixing this isn't going to be easy. And right now, as we watch General Motors or Merrill Lynch lay off or get rid of thousands of workers, we must realize the good-paying jobs are vanishing, anyway. We must face the truth: the price of houses has outstripped income. And the incomes are dropping, not rising. We won't see this balloon's money come back. It is gone. We have to start from scratch. And we can't go back in time. Time always has this nasty habit of moving forwards.

Reforms to Public Finance Will Be Key to Sustained Progress in China, Says World Bank

China, the world’s fourth-largest economy and third-largest exporter, requires reforms to government finance to meet its dynamic needs, says Public Finance in China: Reform and Growth for a Harmonious Society, a new World Bank book.

China’s growth rate of about 9 percent a year over the past decade helped reduce its poverty rate from 60 percent of the population to less than 10 percent today. However, such rapid growth has increased inequalities in income and access to basic services, and strained natural resources.

In its 11th Five-Year Plan (2006-10), the government seeks to resolve these issues by shifting priorities from the overriding pursuit of growth to more balanced economic and social development—an undertaking that will require strengthened public finance.

The World Bank is STILL fretting about China. Brad Setser is always fretting about China. It is as if he were sitting in my burning truck hauling shit that is barreling downhill with flames shooting out, and he notices the Dragonmobile racing past us. 'Hey, they don't have enough chrome trim!' he yells. 'We have to explain to them how to drive their truck. We are experts!'

And the World Bank thinks it is the bank and not bankrupt. It gets money from America. Fake money. Money that will all burn up. The World Bank fears that China will crash its economy. This is too bizarre. I see this all the time. China has pollution! Well, duh! We sent our polluting factories there. Then there is the story about China torturing prisoners. Well, people in glass Gitmos shouldn't throw stones. Then there is the Olympics: Spielberg, a man who is OK with the US and Israel dropping bombs on civilians and torturing Muslims, is worried about Darfur. He wants China to fix Darfur. God help us, eventually China will fix the entire Middle East and Africa. And Spielberg won't like this one bit.

The World Bank:

“Contributors to this book include some of China’s most important economic reformers – people who actually designed policy during the country’s successful emergence. This book represents an excellent example of how China takes active policy debate and follows it up with experiments on the ground,” said Jim Adams, World Bank Regional Vice President for East Asia and the Pacific.

HAHAHA. I hope the World Bank demands that the US have the Chinese run our economic system for us. Sounds like they are practical, open to new ideas and experiment on the ground. We could use some of this. But I doubt they will agree to this plan. Won't hurt to ask. Pretty please.

Sweden's Riksbank Unexpectedly Raises Benchmark Rate

Sweden's central bank unexpectedly raised its benchmark interest rate to 4.25 percent, the highest since November 2002, after inflation surged to a 14-year high last year on plunging unemployment and rising food costs.

The rate was raised by a quarter point and will remain ``at roughly the same level over the coming year,'' Governor Stefan Ingves said at a press conference in Stockholm today. All 24 economists surveyed by Bloomberg expected an unchanged rate.

Sweden is the latest of seven central banks to raise rates since the Federal Reserve slashed borrowing costs last month, as concern that inflation is set to accelerate worldwide offsets the prospect of a recession in the U.S. Australia, Russia, Czech Republic, Poland, Romania and Serbia have all raised rates since Jan. 30 as raw material costs and food prices increase.

More and more nations are imitating the Chinese, not the Americans, British or Japanese. This is increasingly a rift in the G7/US/EU/Japan empire. As the world splits in two, will the currencies of the three violators of trying to stop global inflation, the three nations who are trying to FEED inflation, will we be put under embargo? Will other nations refuse the currencies of renegades? This will be interesting to see.

Japan Economy Grows 3.7%, Twice as Fast as Expected

Japan's economy grew 3.7 percent last quarter, twice the forecast, as exports to Asia and emerging markets helped companies weather the U.S. slowdown.

Gross domestic product in the three months ended Dec. 31 accelerated from a 1.3 percent expansion in the third quarter, the Cabinet Office said today in Tokyo. The median estimate of 39 economists surveyed by Bloomberg News was for annualized growth of 1.7 percent.

And the Japanese depression is totally fake! Only the workers are being depressed! They and only they are seeing things shrink, get worse and die. Everything else is roaring along in Japan! This is totally ridiculous. The Japanese vacillate between weeping about their terrible depression and gleefully celebrating their many, many financial and trade victories. They are shocked today to see Germany pull ahead in the all-important 'trade export profits' category. They were #1 and are now #2 with China breathing down their necks.

While the US is on fire and barreling downhill, not to Needles but into Death Valley.

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Comments

[Richard]

Research shows that Government Bonds imploded January 24, 2007, as a result I recommend that one be long the Gold ETF, GLD, and use a small amount of margin credit to purchase the Rydex Mutual Fund RYJUX which is inverse of the 30 Year US Treasury.

[Al]

Spielberg is an asshole. Funny thing is that Chevron made the original oil discoveries there back in the 70's but didn't pursue it mostly due to the ongoing civil conflicts. a majority Chinese consortium has the oil rights now which is why we don't get involved. if the fighting ends the Chinese get hella oil. Only way to over ride the Chinese contracts would be to Iraq them. meaning invade, tip over the govt and negate the existing oil contracts.

[larry, dfh]

I seem to be in the same situation vehicle-wise. I had thought that after a certain age, I wouldn't have to be driving a vehicle and constantly worrying that it would break down. At least if you have a farm you can park the non-working vehicles outside and wait for better weather to repair them, without having neighbors complain and the municipality's coming down on you.

[Elaine Meinel Supkis]

Yes, this is my workhorse truck that broke. And the farmers who let me park my plow there are terrific people. Salt of the earth, etc. It was just a hose that broke. I will pick up the snow plow tomorrow. I don't have to rush. No one rushes in farmlands except cow milking time and harvest before a storm.

Al: you are 100% right. And put it in words better than anyone else I have read about this! I agree with your analysis.

[mike]

im a little new to these things and wonder how i get into those bonds paying out 20 percent as with that kind of return i might start using the metro as i might be able to afford real city living again....?

[Elaine Meinel Supkis]

Usually you join an organization that buys these bonds. So it isn't pure profits. Certainly, no banks will offer them to you, alas.

Warren Buffett makes a lot of his loot this way, you know.

[Jim B]

Everyone acts like the purpose of life is "owning" a house and buying stuff that's new. Well it's not. I rent my cottage, buy used cars, used clothes, organic grains from the co-op, and yoga classes. I'm healthier and happier than just about any rich person I've ever met. What real is within: www.wordsofpeace.org.

[K]

It is as if he were sitting in my burning truck hauling shit that is barreling downhill with flames shooting out, and he notices the Dragonmobile racing past us. 'Hey, they don't have enough chrome trim!' he yells. 'We have to explain to them how to drive their truck. We are experts!'

I'm behind on my reading Elaine but I had tell you this made me laugh so hard I dropped my spoon and got yogurt on my pants.

K